Harbour Trust Co. Ltd. v. Aaron (In re Plusfunds Group, Inc.)

Case No. 14-817-bk(L) (2d Cir. Jan. 21, 2015) (Summary Order, not precedential)
Second Circuit held that the bankruptcy court abused its discretion when it denied a motion to reopen the bankruptcy case without considering what prejudice, if any, would result from granting the request. After recognizing that the decision to grant or deny a motion to reopen is discretionary and fact dependent, and will not be disturbed absent an abuse of discretion, the Second Circuit nevertheless concluded that remand was appropriate because the bankruptcy court's decision failed to explain whether any prejudice would result from reopening the case (even though the court did conclude that there was no showing of prejudice resulting from *denial* of the request to reopen). See Batstone v. Emmerling (In re Emmerling), 223 B.R. 860, 864 (B.A.P. 2d Cir. 1997) ("A court of equity must consider whether reopening a case would prejudice the adversary or cause a change in the adversary's position.")
Procedural context:
U.S. Bankruptcy Court S.D.N.Y. (Peck, J.) denied the motion of Harbour Trust Co. Ltd (the "Trustee"), as trustee for SPhinX Trust (the "Trust"), to reopen the chapter 11 case of debtor Plusfunds Group, Inc. The District Court affirmed the bankruptcy court's decision. By summary order, the Second Circuit vacated the District Court's judgment and remanded to the Bankruptcy Court to explain what prejudice, if any, would result from reopening the bankruptcy case.
Debtor filed for relief under chapter 11 on March 6, 2006 and its plan of reorganization was confirmed on August 7, 2007. Pursuant to the Plan and a related trust agreement, the Trust was created for the primary purpose of liquidating causes of action for the benefit of the joint official liquidators of related funds. On December 3, 2010, while certain litigation was pending, the Debtor moved to close its chapter 11 case, which was subsequently granted. Since the Trust automatically terminated after five years unless extended according to the terms of the Trust Agreement, the Trustee attempted to extend the Trust's term through an amendment and by filing a motion for approval of the extension with the Bankruptcy Court, together with the request to reopen the case. The defendants in certain pending litigation opposed the motion. (Facts taken from In re Plusfunds Group, Inc., Case No. 08-10402 (JMP) (Bankr. S.D.N.Y. May 13, 2013) [ECF No. 788]).
Winter, Cabranes, Raggi

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